This article was written by Adam Hartley of SnapDragon Systems Ltd. It reviews the ground-breaking PTS software from PAT Systems. If you would like more information on the PTS software then click here

Introduction
With the collapse in the LIFFE Bund volume and with everyone moving over to the DTB (now Deutschland Eurex) and now with LIFFE Connect up and running, people are becoming much more aware of electronic trading. One company, which spotted this coming some years ago, was PAT Systems. Set up by a couple of traders they developed the PTS (Personal Trading System) order entry software. What distinguishes PTS from other order routing software is that the orders can go directly into the electronic exchange computers instead of appearing on a screen for a broker to execute. This leads to faster execution and lower dealing costs as no human element is involved in the execution process. In addition the connection can be made over the internet enabling users to trade from home as if they had a Eurex or LIFFE terminal. At the moment PTS can only be used to trade on the Eurex or LIFFE exchanges though other exchanges will be added in due course.

How the PTS Software is Used
To start up PTS you first set up an internet connection and then login with your private username and password. This then connects you to your broker's server computer, which in turn is connected straight to the relevant exchange. Prices are fed to the software showing current bid, offer and last trade together with the corresponding sizes. Most users will also have access to the Depth of Market information, which displays all the Bids and Offers together with the sizes for 10 ticks above and below the market.

Even as a price feed the PTS software excels, being faster than conventional satellite feeds and far less prone to downtime as it is connected straight in to the exchange computers themselves. However, where PTS really scores is in the speed and ease of order entry. This is normally centred around the Hot Quotes screen that displays the Bid, Ask and Last together with their sizes. For example, to enter a limit Buy order close to the market one simply places the cursor over the Offer price, which is conveniently coloured blue. A pop-up list then appears displaying all the prices below the Offer price, one of which can then be selected. One can alternatively select the Offer price itself. A confirmation box then appears checking that you want to buy X contracts at the selected price. The number of contracts is set in a separate box, which can quickly be accessed by hitting the space bar. This is normally set once and does not need to be changed unless desired. To place a sell limit order the cursor is placed over the red-coloured Bid price and a similar pop-up menu appears displaying prices above the offer price. To enter a Buy Market Order one clicks on the Offer Price size; to enter a Sell Market Order one clicks on the Sell Price size. Though this all may sound a trifle complicated it quickly becomes second nature.

For users who have the Depth of Market information there are additional order entry short cuts: clicking on prices within the Depth of Market screen allows one to enter limit orders beyond the current bid/ask. That is, to ensure a fill, one might want to buy at a limit of 1 or 2 ticks above the current offer price. By clicking on the accumulated sizes for the bids and offers that are displayed one can buy or sell that number of contracts. This would typically be used when entering large orders where you want to lift the entire current offer for example.

For stop orders or orders that are too far from the current market action for the pop-up menus to include the price, there is a general order entry screen that allows the user to enter market, limit or stop orders for the desired size at the desired price.

Once an order is entered it appears on the Status screen as a working order until it is filled or cancelled. Completed orders which have been filled or cancelled are transferred to a separate screen. Working orders can be queried by clicking on the query button in the unusual instance where the DTB has been a bit tardy in reporting a fill.

On the Personal Account screen the P & L for the day is calculated in real-time using real-time FX rates to convert everything back to a single base currency. By clicking on the P&L the individual contributions from each open position are displayed together with the current position.

The Broker's Perspective
From the broker's perspective PATS is a real boon as many of the traditional problems associated with brokerage are no longer present. The broker has a server computer running the PATS server software, on which all the client information is set up including limits on the number of lots that a client can trade for each futures contract. It is not possible for the user to enter orders that violate this limit. In addition the real-time P&L means that the broker can accurately monitor clients positions thereby preventing clients "blowing themselves up" with the broker having to make up the losses. There are also not going to be the execution errors that normally occur in any brokerage operation: the user is always asked to confirm a transaction and it is entirely his responsibility what he does when using it. Finally of course, with fully automated trading software such as this there is not going to be the need for the expensive brokers to staff the phones which will in the long run lead to far cheaper brokerage operations and hopefully to cheaper dealing costs for the end user. Brokers will become mainly a clearing operation with the clients doing all the execution for themselves.

Practical Experience with Trading Using PTS
Having been using the PTS software for trading for some 12 months now I can personally say that it is excellent. Fills are typically received in a couple of seconds and one definitely feels that one is on a level playing field at last, being as close to the price action as other market participants. There have been a few technical difficulties along the way with a few bugs in the PTS software though these are quickly being ironed out with new versions released regularly. Other problems are mainly to do with the internet connection, though these have been mercifully few in number. For the situations where the PATS software or the internet connection does go down your broker should supply an emergency telephone number that you can use to get to brokers who are sitting in front of DTB or LIFFE terminal and who can put the orders in by hand. Having used the system for the length of time that I have, I can honestly say that I am completely confident in the reliability of the whole trading process using PTS.

Comments & Conclusion
The PTS software is the Rolls-Royce of order entry software, or perhaps it should be a Ferrari as speed and ease of entry are the key issues in the design. The quick order entry facilities would certainly suit the displaced local in scalping a few ticks in a hurry though the ease of use suits everyone: the last thing that one wants to have to do is to wrestle with some clumsy software when the market is going against you!

As far as costs are concerned it is up to the brokerage operation as to the charges that are levied for using the PATS system. In general, commission rates can vary considerably from clearing rates up to rates approaching traditional retail rates depending on which broker is used and on the volumes being traded:. One broker is charging £8 or 12 Euros per round turn with a minimum monthly commission charge of £600 or 900 Euros, with discounts for high volume levels.

Having personally been using PTS for my daily trading I would now be loath to go back to conventional methods of trading. The future of trading lies with electronic exchanges and with order-entry software such as PTS.